Schaumburg colleges part of $95 million fraud settlement
Illinois Attorney General Lisa Madigan today announced two settlements with the for-profit education company Education Management Corporation that will significantly reform its recruiting and enrollment practices, forgive more than $3 million in loans for Illinois students, and return money fraudulently obtained from the state of Illinois, according to her office.
The settlement reached by Madigan and attorneys general in 39 states and the District of Columbia will provide $102.8 million in outstanding student loan debt relief held by more than 80,000 former students nationwide, Madigan's office said.
The Pittsburgh-based EDMC operates the Illinois Institute of Art and Argosy University in Schaumburg, among its 110 schools in 32 states and Canada.
The settlement also requires EDMC to provide disclosure to students about the true cost of the school and expectations for job placement after graduation. It bans the school from making misrepresentations to prospective students, prohibits enrollment in programs that lack the accreditation required for state licensure or required for employment by the bulk of employers, and institutes an orientation period when new students can withdraw with no financial obligation, according to the attorney general's office.
"EDMC will be held accountable for deceptive recruitment and enrollment practices that were unfair and misleading to Illinois students," Madigan said in a news release. "The settlements will provide former students with debt relief, recoup money that was fraudulently obtained from the state, and help ensure the company will make substantial changes to its practices for future students."
Former EDMC students are eligible for automatic relief related to outstanding institutional loans if they were enrolled in an EDMC program with fewer than 24 transfer credits, had withdrawn within 45 days of the first day of their first term, and had their final day of attendance between January 1, 2006 and December 31, 2014.
The second agreement is a global agreement with Madigan, the federal government, attorneys general in 11 states and the District of Columbia, and whistleblowers.
It requires EDMC to pay a total of $95.5 million, including $1.9 million to the state of Illinois, to resolve alleged violations of the False Claims Act, as well as claims by the Consumer Protection Consortium, Madigan's office said. The agreement resolves allegations that EDMC illegally paid incentives to its admissions recruiters for the number of students they enrolled.
Madigan's office began investigating EDMC after one of its employees filed a whistle-blower lawsuit alleging the company violated a ban on compensating its recruiters based on the number of students they enrolled, and fraudulently induced the federal government and the state into providing financial assistance to EDMC students.
The consumer agreement also will put in place a significant interactive online financial disclosure tool required for all prospective students who utilize federal student aid or loans. The system, called the Electronic Financial Impact Platform, will produce a detailed financial report that includes the student's projected financial commitment, living expenses and potential future earnings.
As part of the settlement, Thomas Perrelli, former U.S. associate attorney general, will independently monitor the company's settlement compliance for three years and issue annual reports.
In a written statement Monday, EDMC states it hopes the new, more transparent recruiting and disclosure standards will serve as a model for higher education.
"When we started our work together, the attorneys general had many concerns about the ways that some higher education providers recruited students. EDMC wanted to take the lead in developing the best ways to address each one of these concerns, and we have done so," EDMC President and CEO Mark A. McEachen said. "EDMC is proud to have worked closely with the state attorneys general to produce a new, one-page, easy-to-read disclosure that provides important information for students as they consider their higher education options at one of our schools."
McEachen said EDMC maintains that the accusations raised by the federal government and state attorneys general "were without merit," it is best to resolve them and focus on educating students.